On The Brink with Castle Island Guy Young (Ethena) on the Past and Future of Crypto Interest Rates (EP.507)
11 snips
Feb 28, 2024 Exploring crypto interest rates, Ethena launch reflections, yield farming viability, convergence of tradfi and crypto yields, Eigenlayer concerns in DeFi, stablecoin supply impact on rates, Guy Young's medium-term expectations for crypto rates.
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ETH Funding Rates and ETF Expectations
- The ETH funding rate rises as markets anticipate ETF approval, driving demand for leveraged long positions.
- This willingness to pay high rates reflects rational expectations of underlying price moves, not market irrationality.
Tokenization Enables DeFi Leverage
- Tokenizing the cash and carry trade enables integration into DeFi applications for enhanced capital efficiency.
- This composability unlocks additional yield opportunities not possible for individuals executing the trade on their own.
Athena’s Market Impact Threshold
- Athena’s influence on funding rates grows as it approaches 30-40% of open interest.
- Currently at about 6%, there is significant room for growth before materially impacting market funding rates.